Europe's bad mood: Does Obama need to worry?

WASHINGTON — The elections that drove Nicolas Sarkozy out of power in France and left Greece scrambling to build a coalition government pose a financial threat to the United States that could undermine President Barack Obama’s efforts to cast himself as the agent of a U.S. economic revival.

For Obama, the danger is that any economic turmoil unleashed by the French and Greek elections will spill over to the United States, slow the recovery even more and, ultimately, further jeopardize his re-election, adding him to the recent roster of politicians whose careers have been short-circuited by economic anger.

At the same time it has shifted Europe’s political balance to the left and in favor of the type of economic growth policies that Obama has advocated both for Europe and for the United States.

For Mitt Romney, the all-but-certain Republican presidential challenger, the results in Europe underscore how deeply economic unease affects politics. They feed his camp’s underlying storyline: that Obama’s economic policies would not safeguard the United States from a widening European recession.

But as a rejection of austerity measures, the European elections also present a cautionary tale for the type of belt-tightening that Romney and congressional Republicans have embraced.

“It is clear there is a lot of economic anxiety in the EU that is affecting world markets, and how that affects the economy will have an impact on voters throughout this summer and into the fall,” Romney adviser Kevin Madden said.

Obama senior campaign adviser David Axelrod has said repeatedly that the biggest challenge to Obama’s re-election is economic developments beyond Obama’s control.

“As has happened several times before, when our economy gets going, events elsewhere can intervene and throw a monkey wrench in the works,” he said. “We’re not hoisting a ‘Mission Accomplished’ banner. We know there is a lot of work left to be done and the headwinds are part of that equation.”

While economic crises appear to be taking their political toll across the Atlantic, the United States is not Europe.

The anti-incumbent mood that swept through France, Greece and Italy in the past three days was fed by grievances that have little resemblance to the anxiety percolating here. Across the Atlantic, voters rebelled against deep austerity measures designed to address the 17-nation eurozone debt crisis. In the U.S., government belt-tightening has been far less severe and the debate has centered on Obama’s calls for more short-term spending to stimulate a weak economic recovery.

“The debate we’re having here in the United States is different than the one they’re having in Europe,” Madden said, “but the economy is still the premier issue that voters are using to consider their vote for president in November.”

Obama advisers are quick to note the difference, saying Obama has pressed for an approach to debt reduction that includes cuts and increased revenue, such as higher taxes on wealthier taxpayers and the elimination of some tax breaks for corporations.

If the elections in Europe represented voters recoiling to austerity measures, Axelrod said, “I don’t think we’ll get caught up on the wrong side of that debate.”

Still, the U.S. economic recovery has been weak and erratic. With millions out of work, the unemployment rate remains above 8 percent, and polls show more people disapproving of Obama’s handling of the economy than approving.

The victory of Socialist Francois Hollande over the conservative Sarkozy in France and the losses sustained in Greece and Italy by mainstream parties illustrate the fierce anti-austerity backlash in Europe. But it didn’t come as a surprise; since 2009 leaders in virtually every European country that tried to respond to the crisis with austerity measures have lost elections.

The United States economic downturn has not been as severe. The U.S. economy has been growing since 2009, though it has recovered slowly and erratically and has left unemployment still above 8 percent. The policy debate across the country has been one over how to stimulate the economy, with Obama pressing for more spending on jobs programs against Republican objections about the rising cost of government. But even Romney and Republicans, who have made an issue of the nation’s rising debt, have proposed modest cuts compared to what Europeans have instituted.

“The European situation is quite different form the U.S.,” said Simon Johnson, an economist at the Massachusetts Institute of Technology and former chief economist at the International Monetary fund. “Certainly if you were proposing precipitating immediate austerity in the U.S. you might reconsider it. But that is not what Romney or Obama is going to be proposing.”

Romney supports the Republican budget plan offered by House Budget Committee Chairman Paul Ryan, R-Wis., and has called for even steeper domestic spending cuts and higher spending on defense. But even those cuts aren’t as steep as what debt-ridden countries like Greece have had to contemplate.

Despite the fear that a European financial collapse could spread to U.S. shores, the Obama administration so far has taken the position that the Europeans can correct their own problems without assistance from the United States. Obama aides have said repeatedly that the president has no intention of adding U.S. taxpayer dollars to the IMF for any possible bailout of a eurozone country, a step that would invite opposition from congressional Republicans.

That leaves Obama with few options to stave off European financial disaster, Johnson said. And even when it comes to protecting the U.S. economy, Obama’s best bet rests with the Federal Reserve, which Johnson faulted for letting banks reduce their capital reserves to pay off dividends.

The European financial network, intricately intertwined with the U.S. banking system, looks more precarious after the election results, Johnson said, adding: “We should be building up capital buffers against losses.”

The economy aside, the election results in France pose new foreign policy challenges for Obama.

Hollande has vowed to pull French troops out of Afghanistan by the end of the year.

What’s more, Obama is looking for European countries to help with the U.S. commitment to assist Afghanistan rebuild and sustain internal security after all U.S. combat troops leave in 2014. Those pledges will be at the center of discussions when Obama hosts fellow leaders for the May20-21 NATO summit in Chicago.

The questions, said Heather Conley of the Center for Strategic and International Studies, is whether Europe can make that commitment based on both its political and austerity constraints.

And, she added, can the U.S. seek such European support without making some financial commitment to helping the eurozone solve its debt crisis.

“It’s ironic that at the same moment we’re telling them to take care of this yourself,” she said, “we are asking them to fulfill their pledge.”